Andrew Leigh

Here's what some economic modelling has in common with the tobacco industry

It’s the sort of scenario Mad Men would slyly mock – advertising with handsome doctors extolling the health benefits of smoking. Today, the battleground isn’t lung cancer, its economics. Just as past generations had to battle those who spread confusion about cigarettes, today’s voters have to fight a manufactured smokescreen about economic reform.

Let’s look at how we got here.

In the middle of last century, magazines would regularly feature advertisements proclaiming “More doctors smoke Camels than any other cigarette” or “Smoke a Lucky to feel your level best”.

The claims were part of an industry-wide campaign designed to discredit the growing body of evidence proving the harms of smoking.

As the science grew stronger, the opponents shifted tack – from advertising with doctors, to disputing the science, to claiming smoking was a form of free speech. One tactic was to test cigarette smoke on rats, in the full knowledge that rats did not have the lifespan to develop lung cancer.

Stanford’s Robert Procter came up with a word to describe people who spread ignorance – agnotology (literally: the science of not knowing). The tobacco companies no longer just manufactured cigarettes. They manufactured doubt.

The facts about smoking speak for themselves. When I left school in 1990, one in four Australians smoked daily. Today, through a combination of education, regulation and taxation, that figure has fallen to one in eight. Men have traditionally smoked more than women, so it’s no surprise that rates of lung cancer and chronic obstructive pulmonary disease for men are as low as they’ve been in half a century.

Tobacco reforms are a win for science, public health and economics.

We may be winning the war against lung cancer. But agnotology isn’t giving up the battle. In the last election, a desperate coalition of vested interests sought to manufacture fear about proposed changes to negative gearing and the Capital Gains Tax discount.

A bevy of absurd and contradictory claims were made. Malcolm Turnbull said that if Australia no longer had the world’s most generous tax breaks for property investors, house prices would be “smashed”. Kelly O’Dwyer claimed that changing negative gearing would “increase the cost of housing for all Australian”. Peter Dutton thundered that the ‘stock market will crash’.

Treasurer Scott Morrison – a master craftsman in the politics of fear – noted that 67% of taxpayers who claim negative gearing have a taxable income of less than $80,000.

The key phrase is “taxable income” – in other words, income after taking account of negative gearing. In fact, most of the benefits of negative gearing and the capital gains tax discount go to the top tenth of income-earners. The average surgeon gets 16 times as much of the benefits as the typical nurse.

In much the same way the tobacco companies funded junk-science, those who were making money from negative gearing funded junk-economic modelling.

In March, vested interests trumpeted a piece of “analysis” as though it had modelled Labor’s policy. It didn’t, and it contained a number of errors, including getting Australia’s GDP wrong by a factor of eight. Yet the analysis was reported in almost every outlet. As Proctor described of the tobacco lobby, the tactics aren’t about winning the day, they’re an attempt to ‘throw sand in the gears’.

Grattan Institute head John Daley notes “one of the problems is that any time anyone writes something of 20 pages or so, everybody takes it seriously irrespective of the quality and irrespective of the source”.

But in the last election, agnotology failed to carry the day. Even Australians who benefited from negative gearing could see that something was wrong with a system which priced young families out of the market, and has seen the Australian home ownership rate fall to a 60-year low.

Support for changing negative gearing came from across the political spectrum: Treasury, the Reserve Bank of Australia, Saul Eslake, Cassandra Goldie, Chris Richardson, Peter Morgan, Jeff Kennett, even Joe Hockey.

Just as with climate change, the public could see the problem with their own eyes, and the vast majority of experts concurred on the need for change. Labor lost the election, but most analysts have judged that our negative gearing changes were an electoral positive.

Yet the bigger challenge remains. If we want good policy in Australia, we need a national effort to call out shonky studies. We must question who pays for the kinds of reports that tobacco lawyers once called “studied ignorance”.

Not all modelling is created equal – some of it is created precisely so the most powerful can continue to make money at the expense of everyone else.

* Andrew Leigh is the Shadow Assistant Treasurer and MP for Fraser. His website iswww.andrewleigh.com.